Make in India, a Milestone for Indian Economy

29 December 2014 (All India Radio News Analysis)

This is the FM Gold channel of AIR, In the Program News Analysis now we bring you a dialogue on Make in India, a milestone for Indian Economy. The participants are D.Raghuraman, Former Secy. Gen. Assocham  and Jainth Roy Chaudry, Senior Economic Journalist.

This is of course a major program which the government has launched in order to boost the manufacturing sector growth. Manufacturing as a percentage of GDP has fallen to almost quarter of our GDP. It is Govt. wish to at least develop in next few years or so. Most countries in the world do depend up on services sector for/to fuel their engine growth, but manufacturing is always an important part of Economy, especially in the developing economy. Because it is the manufacturing sector can observe huge number of workers, especially those who are released from the Agriculture. 

The Finance minister Mr. Arun Jaitley himself has underlined the fact that we do need to do it, in order to go ahead, he has talked about entry point should being eased, initial barrier being lowered, and enabling environment being created. But how far do you really think we have enabled to do… what we want to do?

In fact if you really see the government earlier, in the, under the UPAs time, have come out with the National Manufacturing Competitive Policy which indicated that we should increase the Manufacturing in GDP from 16% to 25% by 2025 and there is the only way we can provide, the increase in people who are coming to the job force, especially skilled and semi-skilled people which you rightly said, that they are the one who are needed for the manufacturing to come and see they were able to achieve this type of objective. Unfortunately we were not been able to go through this process, Because of four major issues. 1. Land, which is actually a state subject, 2. Labour, especially related to labour relation as well as the manner in which the labour issue they handle, including manner in which skill needs to be developed with respect to making the unskilled people to do skilled works. 3. Power, that means we have the problem with the access to electricity and also other infrastructures like logistics. 4. Capital, we find that, we have the problem with the centre-state coordination, and also the manner in which we reduce the transaction cost in the manufacturing cost. If we look at these four issues we talked about, we find that there is big lack with respect to the manner in which the projects are started and they are implemented. And unfortunately the project which would take just 3 years goes in to 5 years – 10years, in fact some of these glaring examples are like POSCO in Orissa. So what is very important is, see, the Centre-State coordination is there, that is why PM talked about re-organization of the Planning commission and the manner in the State-Centre could be actually made to work together. So, that there is the problem with respect to not just figure pointing at each other but looking at the way and means of coordinating and cooperating, so that we are really able to see the kind of program and the kind of initiative which have been started by the government to come to fusion. In fact this is where the real critical issues is, one of implementation and the manner in which we get it done, because the intentions are very clear, these are the needs of the day, and we have to do it sooner than later and it is better that we are able to come up with concrete mechanisms to achieve growth.

Some say were there at least 164 more approval you need at the municipal, at the state, at the centre level in order to setup a manufacturing business in India. Of this to any one is mind, seems to be huge number of approval. We do figure very low in the index of global ease of doing business, in fact year after year we have been relegated to very low position, far below the most of the Asian rival, forget about china which figured in much higher position in the index, in some years we have been placed lower than Bangladesh. Now, how do you see this discovery, of that matter any government, being able to resolve this huge red tap which seems to be girdling, and keeping India from reaching very positive?

This what a question of Centre-State Relation, because the manner in which the centre starts easing the rules & procedures and also comes out with the template of how the state should function and the states agree in fact some of the things like entry tax OCTREI like that they have go many of this. And then with respect to the kind of factory inspection, now we are done away with I think boiler inspection; similarly we have to find ways by which the centre & the state have to agree, because we are federal setup. And it is not possible for us to bring about changes over night but surely we can attempt at that and ensure that the best practices followed in some of the states, there you find the initiatives are moving faster. And we need to actually see that these practices are able to be repeated and multiplied in other states, in fact this is something is not very difficult but whether it’s possible for us with our polity, is the issue. Because if you see, the kind of problem incurring in one state is probably has resolved in another, and so it is important for us to learn from each other, and see how we can proceed. It is possible for us to do, provided that, do we want to solve the problems, and if we have the problem solving approach which I think this provided government is trying to work at probably in facilitating this process.

And there is another confusion which has come cropped a doubt of it, in India, for in India, or Make in India for the export market. Make in India, obviously, of course, Mr. Jaitley today clarified, it will be for both we would be make it for India as well as Foreign Market. The point which the RBI Governor had earlier made is “the foreign markets are in turmoil, so the capability of the foreign market to observe our exports is limited. It point you out the example of china, when china was growing actually the foreign markets were able to observe its exports, china was able to edge out other competitors with its lower cost production, which possibly India may not replicate. Of course there is the case of Africa, which is the large emerging market, but its capability of observing export is till date reasonably limited. We have our main rival china already having made huge head way. In unable circumstance obviously we try to grow the domestic market good possibly to pay out, though the export market cannot be ruled out since we are a low cost manufacturer, not only low cost manufacturer, we are high-tech low cost manufacturer unlike many competitor, however if you want to really develop our domestic market, we have to do away not only with this obnoxious let us say clearance we insist up on getting the business, we need to actually turn India in to one single common market, which the GST would try to do. Where did you think, we are going with that? How fast? How far will we be able to do that?

One of the biggest challenges is to have unified common market and try to do that all the products and goods are brought in to one single umbrella, with the states having some sort of understanding and sharing the revenue. The question is that why we have been talking about for last 10 years are so, we were not been able to reach the conclusion where the states & centre or both and now there are indication that we may be able to go through it in 2016. So probably there is some movement there, but most importantly we have to understand is to, why we are not able to actually go ahead with our intention is that, most of the time, it is not just that the question of even the procedure and kind of checklist which we have as you mentioned more than 164. But the point is, once these are done, they again and re-visit and tell that, what we have done is not right, and suddenly renaissance… in fact there have been problem with respect to that, so we have to have only issues which will be taken the perspective and the retrospective will be handled in a manner in which there is least distress to all the parties concern. And second point, it is not possible for the gate crash, all the procedures and actually brings them to a close very soon. And apart we have to indicate us to where are the type of fault-lines lie and how we are able to tackle them and actually make it clear to the people so that once they go ahead with the project they have not actually being backtracked or been sidelined, road blocks being put there. This is something which we need to put our mind too. Other thing which is important is that Exports based on Growth, we are not Export oriented economy, like the other countries, and it is very important for us to see, because the global market as you rightly said volatile right now and the Europe, Japan, already going through recessionary phase and china is slowing down, it is only the US economy is growing up. It is very difficult for us to ensure export markets in short run, it is good that we prepare our self for easing of internal demand and at the same time to see that we with our proven engineering capability are capable of producing goods innovative practices by which we will be able to compete with others in this project, and definitely we could do so. One of the areas is Defence which we have opened up, thus china is in a large way in the world arms supplies and we need to get in to it, because it is the Defence which give us a kind of volume and also the manufacturing capability which we will be able to global scale of manufacturing capacities and we would be able to have R&D establishments also to be there, so that industries manufacturing can benefit.

One thing which industrialist have been complaining which is why they say much of their investment plans have been held up, have been highly tough. We know of course RBI insisting a high rate of policy rate in order to tame inflation which was had higher for ever seen in the last let’s say half a decade or so. Inflation seems to be tamed somewhat, but the RBI wishes to be little more cautious which is why have been holding its hands. There is talk about kiwi rolling out rolling in by US Fed Reserve which could impact our currency. We have seen in the recent past the currency being a little bit of turmoil, Last year the turmoil was more pronounced. Under these circumstances, where do you see the interest rate headed at? How do you see our industrialist being encouraged to invest?

If you see the IIP figures, especially the manufacturing figures, are quiet depressing. And if we see 

some real more differencing figure inflation contain, probably we see that interest rate should be headed south from the next quarter but the point is very clear that dollar is getting strengthen and US economy getting strong and so definitely there will be depreciation of Indian Rupee. And probably this could to some extend obviate some problem due to export deceleration which means we may be able to compete on our exports but the caution has to be there. And definitely Industry is stressed because of high interest rate. But the issue is also that other factors which have blocked up lot of industrial investment like 18 Lakh crores have been just blocked up because of coal and other kind of issues, power sector, and infrastructure, probably we find that the demand will start improving and also we find the loop of the RBI to look at interest rate with greater emphasis on growth and also probably declare that inflation would be under check. Because we have to understand this year monsoon has not been good and already find that the Rabi sowing is 5% less than what It go on. There is vagaries of weather which means RBI has too exercise caution but we do hope that the type of measure which are announced by the government will actually induce manufacturing and investment cycle will start to actually open up.

Make in India, will indeed a milestone for the Indian economy and will assure the in fact assuring new era where manufacturing is stressed up on where you are able to create large number of manufacturing jobs.

This came to you in the program News Analysis produced & presented by News services division on All India Radio.

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GIST: Make in India, a Milestone for Indian Economy

Make in India: A milestone for Indian Economy, manufacturing sector – fallen to almost quarter of our GDP; enabling environment – entry point, initial barrier, National Manufacturing Competitive Policy – contribution of GDP from 16% to 25% by 2025;  labour force skilled & unskilled people; 4 major issues – Land, Labour, Power, Capital; 3 years Project delays for 5-10 years – eg: POSCO in Orissa; important issues: Centre-state Coordination, re-organization of the planning commission, way & means of coordination & cooperation; 164 approval required for each project – India ranks relegated to very low position in Index of Global ease of doing business, much below the most of the Asian rival – finding the type of fault lines;  states should learn from each other – problem solving approach; capability of foreign market to observe India’s export is limited – foreign markets are in turmoil – EU, Japan in recessionary phase, China slowing down, only US grow; India being High Tech Low Cost Manufacturing, developing Domestic market – biggest challenge is to have Unified common market; Defence Sector – rival china – large way in the world arms supplies – India should develop - global scale of manufacturing capabilities – R&D establishment; Dollar strengthen, Rupee depreciates; High Policy rate stress Industries – factors of coal issues, power crisis, Lacunae in Infrastructure, Red Tapism – blocked about 18 Lakh Crore industrial investment; Make in India to bring new era of Manufacturing Revolution;